Water Tanker Gone!
A recent Australian court case has left a company without the asset that they owned, they have lost any equity and they still owe their Financier $300,000.
- On 28 March 2013, the Directors of Kentor Minerals (WA) Pty Ltd appointed voluntary Administrators to the company.
- At the time, Kentor Minerals owned and operated the Murchison Gold Project in remote Western Australia.
- The Administrator made the point that no supplier could recover goods supplied to Kentor Minerals under Retention of Title provisions, because they failed to properly comply with the PPSA. Several suppliers of mining equipment lost their equipment because they failed to properly comply with the PPSA.
In November 2012, a hire company provided a $300,000 water tanker to Kentor Minerals on a ‘dry hire’ basis as follows:
- There was little in the way of paperwork between the parties.
- The Hire Company had acquired the water tanker specifically for this hire contract
- Equipment finance was obtained.
- The Hire Company remained blissfully unaware of the PPSA until Kentor’s collapse.
Section 267 of the PPSA effectively means that an interest in property vests in the grantor (in this case, Kentor Minerals) where the PPSA has not been properly applied. That is, because the Hire Company failed to comply with the PPSA, its interest in the water tanker now vested in Kentor Minerals.
The Hire company lost its water tanker and the income it was generating.
But it gets worse! The bank being the financier complied with the PPSA and registered its interest against the Hire Company – but not specifically against the tanker by its serial number.
Unfortunately for Bank and the Hire Company, the PPSA throws up another controversial issue: the so-called ‘taking free’ provisions.
The PPSA states that Kentor Minerals would take the water tanker free of the security interest given by the Hire Company to their Bank, because the property could have been registered on the PPSR by its serial number but wasn’t.
So the Administrator of Kentor Minerals has the Hire Company’s water tanker and the Hire Company still owes the Bank $300,000.
Incredibly, the Hire company now finds itself without its property but still on the hook for the outstanding finance.